Mark Coulton (Parkes, Deputy-Speaker) Share this | Link to this | Hansard source

The question now is that the amendment be agreed to.

Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

In continuation, not only do most of the first-round benefits go overseas, but there will even be some cases in which US-based multinationals repatriate their profits, paying the difference between their higher rate and our lower one. In such cases, an Australian company tax cut simply flows into the coffers of the US Treasury, meaning some of the reduced revenue from the Australian company tax cut would be available to be spent by the successors to President Trump—I say 'successors' because we are talking a very long time into the future, and I will come back to that issue.

Having enjoyed the first-round benefits of a company tax cut, the Treasury report then argues that foreign shareholders will respond to higher after-tax profits on their Australian investments. The theory goes that overseas shareholders then invest less in other countries and more in Australia. More investment, allegedly, means greater demand for land and labour. So, in the long run, land prices and wages are supposed to rise.

Of course, as Keynes famously put it, we are all dead in the long run, so it is worth thinking about how long we are talking about. The answer, typically, is seven to 10 years. Since the coalition's tax cut only reduces the tax rate on big business to 25 per cent on 1 July 2026, this means that the coalition is promising benefits that would accrue somewhere between 2033 and 2035. At that point, Prime Minister Turnbull would be in his late 70s and well on the way to becoming the longest-serving Prime Minister since Robert Menzies. As things currently stand, I think most commentators would say he would be lucky to last out the year!

But how big will the gains be? It depends on how you pay for the company tax cut. The Treasury report suggests that tax cuts could be funded by a nationwide land tax, higher personal income taxes or lower government spending. Given that the federal government has not levied a nationwide land tax since 1952, let us set that one aside. So that means you fund it either through less spending or higher income taxes.

According to Treasury, if you do it through less spending, the boost to households is 0.7 per cent. But there is a bit of a wrinkle in that. The Treasury report notes that it is important to recall that the modelling of 'government spending is assumed not to affect directly the welfare of households'. It also notes:

While this is a common modelling assumption, it ignores the fact that: government spending provides goods and services that would otherwise not be provided by the market sector; households derive direct utility from government spending; and infrastructure spending can improve market sector productivity.

So, in other words, if you believe that everything the Commonwealth spends on schools, hospitals and roads has no impact on the welfare of households, then you can believe that the benefit of a company tax cut funded by less government spending is as big as 0.7 per cent. If you do not, then it is smaller than 0.7 per cent.

We should also be wary of a government that claims that it is going to fund a company tax cut out of lower government spending, given that government spending, as a share of the economy, has gone up, not down, under the Abbott-Turnbull government. So, most likely, a company tax cut for big business would be funded by higher personal income taxes—in other words, taxes down on big business; taxes up on individual taxpayers. If you do it that way, the government's own modelling suggests that the benefit to households is 0.1 per cent—not annualised; total.

So how big is a gain in household incomes of 0.1 per cent? If you look at data going back to the early 1970s, you can roughly work out how rapidly household income has grown over that period. It turns out that it has risen by about 0.1 per cent per month. So in exchange for copping higher personal income taxes and a lower corporate tax rate, the government reckons that the most likely scenario is that households would get an extra month of household income growth. That is what the government's own modelling claims the benefit is.

This is at a time when wage growth is at a 30-year low, living standards are below where they were in 2013, inequality is at a 75-year high, the homeownership rate is at a 60-year low and the top one per cent have doubled their share of national income over the past generation. Yet the only economic plan that the government has is a plan which, according to the most likely estimate from their preferred modelling, delivers 0.1 per cent extra income to households in the mid-2030s. No wonder, when you look to independent commentators, they panned it. Ross Gittins says:

If you wanted to create jobs, cutting the tax on foreign investors isn't the way to do it.

Bernard Keane says:

It could be the greatest tax avoidance scam ever perpetrated …

If you want to do something to help business grow, then it makes more sense to invest in trained workers. Make sure that you have proper investment in infrastructure based on cost-benefit analysis and not on National Party pork-barrelling, that you have predictable politics, not the chopping and changing that we have seen from this government, a government led by a man who said he would never lead a party not as committed to climate change as he is but who now backs off from an emissions intensity scheme, even though his own Chief Scientist says it would decrease power prices and tackle emissions.

Labor supports a strong business sector, but we do not believe in quick sugar hits. The government has put in place a $20,000 instant asset write-off—not one like Labor's, which was ongoing, but one which cuts off at midnight on 30 June this year. That is no way to build long-term business growth in this country.

Michael Sukkar (Deakin, Liberal Party, Assistant Minister to the Treasurer) Share this | Link to this | Hansard source

We do not support this pathetic and shabby amendment. It is a quite a long amendment, but I do not think that at the bottom here it should read:

Government's plan to give a $50 billion tax cut to big business is not affordable in the current fiscal and economic circumstances.

I think the amendment should include some of the quotes from a book called Hearts and Minds: a Blueprint for Modern Labor. It is not exactly a bestseller, I might say—I looked on Amazon when searching for this book and it was 7,079,869th on the Amazon list—but we should, in this amendment, include some quotes from the shadow Treasurer.

The Leader of the Opposition asks why there is a distrust of politics and politicians. I will tell him why. It is because those opposite say one thing before they get here and then, when they arrive, say a completely different thing. In his book, the shadow Treasurer said:

Today capital is even more mobile than it was then and it is important that our corporate tax rate is competitive.

He also said:

At 30 per cent, our company tax rate is now above the OECD average … it is how the rate compares to that of our competitors that counts.

He went on to say:

… it's a Labor thing to have the ambition of reducing company tax, because it promotes investment, creates jobs and drives growth.

Now we have had the shadow Treasurer move this pathetic and shabby amendment. Clearly, the shadow Assistant Treasurer, whom I might say had some pretty good publications in his past, had to accept an economic lobotomy in order to get preselection with the Labor Party, because in a paper titled Do rising incomes lift all boats? Dr Andrew Leigh argued quite forcefully, quite persuasively, why reducing corporate taxes benefits all Australians; indeed, it increases investment, increases the number of jobs and increases incomes for those who have those jobs. Why do we have a deficit of trust in Australian politics? Because we have shabby stunts like this and shabby positions taken by the shadow Treasurer and the shadow Assistant Treasurer. They obviously have no scruples, because arguments they have made for many years—arguments I agree with—are now not politically expedient. They have been hijacked by the extreme left wing of their party—the same extreme left wing that Paul Keating referred to when he instituted a cut in company tax from 49 to 39 per cent. The shadow Treasurer and the shadow Assistant Treasurer now stand with those extreme left-wing Labor members who are arguing that we should have a 60 per cent corporate tax rate.

It should not be a great surprise to people that the shadow Treasurer has done this, because the shadow Treasurer has abjectly failed in every single portfolio he has ever undertaken. When he was the immigration minister he made even the member for Watson look good as an immigration minister. There were record boat arrivals. This man is not capable. This man with the shadow Treasury portfolio today is indicating that he is not up for the job—but we know that, because he has done the job. We know that, lamentably, he was the Treasurer of this country for a very short period of time—I am still reminded of Bowen's $18 billion black hole! But he has the audacity to come to this dispatch box and criticise this government's efforts to turbocharge our economy and improve the budget bottom line.

We have got a team here: the shadow Treasurer, who is an abject failure in everything he has ever done in this place and continues to be; and the shadow Assistant Treasurer, who I think in his heart of hearts agrees with us. In his heart of hearts he knows that the company tax cuts for all businesses, which we are proposing, are so important for this country, but he has sold his soul for a seat in parliament. He is colloquially known as 'the lobotomised member for Fenner' because they have taken every good idea that he ever had and reprogrammed him. Now he sounds like someone on the Socialist Left of that party.

This amendment is shabby and very short-sighted. In the OECD even the socialist French government is implementing cuts in corporate tax from 30 to 28 per cent. We will have a higher corporate tax rate than socialist France. Ponder that thought.

It is extraordinary that the Labor Party has dragged this motley duo of the shadow Treasurer and shadow Assistant Treasurer to this extreme left position, which I really would have expected to see from the Greens political party, not the Labor Party. When I had a look at Hearts and Minds: a Blueprint for Modern LaborI borrowed it from the library, Mr Speaker—I saw there was a foreword from Paul Keating. Paul Keating would repudiate this motley duo of the shadow Treasurer and the shadow Assistant Treasurer, because they have repudiated every single legacy of that period of Labor government.

We will continue to do what is right for this country and make these arguments. These are tax cuts for all businesses. These are tax cuts that will start with your local hairdresser. These are tax cuts that will start with the local cafe. These are tax cuts that will start with people like my sister, who has started a small business, working from home so she can be with her children. These are tax cuts that will benefit her. These are tax cuts for the smallest companies, the smallest businesses—the businesses that we know drive the growth, the entrepreneurial spirit and, ultimately, the prosperity of this country. So I am very disappointed to see that the motley duo of the shadow Treasurer and assistant Shadow Treasurer have been dragged to the extreme left of their party, but we will do what is right. We will continue to argue for these tax cuts. They will ultimately provide the economic growth that we need in order to give Australians the prosperity that we know they deserve. We are not going to let these shabby little political stunts get in the way.